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Unformatted text preview: (EPS).
EPSt = c0 + c1 t + . . .
ln (EPSt ) = d0 + d1 t + . . .
or more complex econometrics (e.g. ARIMA).
Time-series models outperform naive models.
You only have quarterly observations of earnings (at best) for,
typically, 10–15 years; 40 to 60 quarters of data. Equities I: R. J. Hawkins Econ 136: Financial Economics 4/ 20 Earnings and Dividend Growth
Analysts can add value:
5 Firm-speciﬁc information since last earnings report.
Macroeconomic information bearing on future growth.
New competitor information.
Private information about the ﬁrm.
Public information other than earnings.
e.g. earnings retention, proﬁt margins, asset turnover, etc. However, “[t]he evidence indicates that this superiority in
forecasting is surprisingly small for long-term [3-yr or 5-yr]
forecasts and that past growth plays a signiﬁcant role in
determining analysts forecasts.”
Things to consider:
3 The amount of recent ﬁrm-speciﬁc information.
The number and quality of analysts following the stock.
The extent of di...
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- Fall '08